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ACIT, Circle-2, Solapur Versus Vyapari Sahakari Bank Maryadit

2016 (3) TMI 915 - ITAT PUNE

Addition on account of accrued interest on NPA u/s.43D - Held that:- The assessee being a co-operative bank was also governed by the Reserve Bank of India and thus the directions with regard to the prudential norms issued by the Reserve Bank of India are equally applicable to co-operative banks. The provisions of section 45Q of the Reserve Bank of India Act, 1934, have an overriding effect vis--vis income recognition under the Companies Act. Hence, section 45Q of the 1934 Act shall have the ove .....

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r claim of the assessee. Therefore, respectfully following the decision of the jurisdictional High Court in the case of HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT ] and in absence of any distinguishable features brought to our notice by the Ld. Departmental Representative, we set-aside the order of the CIT(A) on this issue and direct the AO to delete the disallowance. - Decided in favour of assessee - ITA No.41 and 616/PN/2015 - Dated:- 10-2-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AW .....

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were heard together and are being disposed of by this common order. 2. First we take up ITA No.41/PN/2015 for A.Y. 2010-11. In grounds of appeal No.1 to 7 the revenue has challenged the order of the CIT(A) in deleting the addition of ₹ 1,58,24,201/- made by the AO on account of accrued interest on NPA u/s.43D of the I.T. Act. 3. Facts of the case, in brief, are that the assessee is a Cooperative Society registered under Cooperative Societies Act with license from RBI to carry on the busin .....

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cordance with the RBI guidelines. The details of interest on NPA furnished before the Assessing Officer are as under : NPA interest receivable as per Balance Sheet As 31-03-2010 Rs.1,19,90,944/- Less : NPA interest receivable upto 31-30-2009 Rs.61,66,243/- Interest on NPA accounts, which has not Been credited to P&L account pertaining to the period 01-04-2009 to 31-03-2010 Rs.58,24,201/- 5. The AO found that against the interest receivable on NPA account shown in the balance sheet, a contra .....

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e ICAI and directives issued by the RBI from time to time. However, the Assessing Officer distinguished the decision of the Hon'ble Supreme Court relied upon by the Assessing Officer stating that the said decision was in the context of a commercial scheduled bank wherein deduction u/s.43D was available but the same could not be extended to non-scheduled cooperative banks as they have been expressly excluded from the purview of sec.43D. Further since the assessee had been following the mercan .....

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eal before us. 8. After hearing both the sides we find identical issue had come up before the Tribunal in assessee s own case for A.Y.2 008-09. We find the Tribunal in ITA No.888/PN/2012 order dated 26-09-2013 decided the issue in favour of the assessee by observing as under : 5. The next issue is with regard to addition of ₹ 22,32,767/- which represents the interest receivable on non-performing assets (NPA) not taken to the profit and loss account as per the RBI guidelines. This issue is .....

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r of the assessee by the decision of the Coordinate Benches in the case of The Durga Cooperative Urban Bank Ltd., Vijayawada (Supra) and Karnavati Cooperative Bank Ltd. (Supra). We find no reason to interfere with the reasoned order of the Ld.CIT(A) and accordingly the same is confirmed. In the result, the Revenue s ground is dismissed. 6. Facts being similar, so following the same reasoning, we hold that the CIT(A) was not justified in sustaining the addition of ₹ 22,32,767/- representing .....

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ction 43D, nonscheduled co-operative banks were specifically excluded from the special provisions of section 43D regarding interest on sticky advances. He held that the Central Board of Direct Taxes Circular No.F.201/81/84/ITA-II, dated October 9, 1984, was applicable only to banking companies and not to nonscheduled banks and co-operative banks. The Commissioner (Appeals) directed the Assessing Officer to delete the additions on account of interest on sticky advances. This was confirmed by the .....

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ing effect over the income recognition principle followed by co-operative banks. Hence, the Assessing Officer has to follow the Reserve Bank of India Directions, 1998. Thus, the deletion of the additions on account of interest on sticky advances was justified. 10. Respectfully following the decision of the jurisdictional High Court cited (Supra) as well as the decision of the Tribunal in assessee s own case in the A.Y. 2008-09 we find no infirmity in the order of the CIT(A). Accordingly, the sam .....

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eing questioned by the AO it was submitted that it has amortized the amount of such premium paid on Government Securities which are held under the category 'Held to Maturity' only, as per the provisions and rules of RBI, which are mandatory to all banks. However, the Assessing Officer was not convinced with this reply. He observed that the securities acquired by banks with the intention to hold them till maturities are classified as HTM securities. The AFS and HFT securities are in the n .....

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to amortize the premium on HTM, it is not allowable under Income Tax Act. All capital assets are to be valued at cost only and no part thereof can be claimed as revenue expenditure in computing taxable income. He accordingly disallowed the amount of ₹ 87,048/-. 13. In appeal the Ld.CIT(A) following the decision of the Tribunal in the case of Janta Sahakari Bank Ltd. vide ITA No.819/PN/2010 decided the issue in favour of the assessee and deleted the disallowance. 14. Aggrieved with such or .....

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assessee by observing as under : 6. We have considered the rival arguments made by both the sides. The only issue to be decided is regarding the disallowance of amortization of premium on Govt. securities of ₹ 25,93,929/- by the AO (Rs.35,28,509/- as claimed by the assessee in the grounds). We find the AO disregarding the CBDT Instruction No.17/2008 dated 26-11-2008 disallowed the deduction of amortization of premium by following the decision of the Hon ble Supreme Court in the case of So .....

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ines thereby ignoring the decision of the Supreme Court in the case of Southern Technologies Vs. CIT (320 ITR 577)? 6.1 We find the Hon ble High Court dismissed the appeal filed by the Revenue on this issue by observing as under : 7. As far as question (C) is concerned, we find that an identical question of law was framed and answered in favour of the Assessee by this Court in its judgement dated 04th July, 2014 in Income Tax Appellate No. 1079 of 2012, Commissioner of Income Tax-2 Vs. M/s. Lord .....

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